Banks lose fight over Apple Pay

The big Australasian banks have lost a dispute with Apple over mobile payments, refereed by the Australian Competition and Consumer Commission.

Westpac, BNZ parent NAB, and ASB parent CBA wanted the regulator to grant them authority to negotiate as a bloc with Apple.

This morning, the ACCC confirmed its draft decision that they cannot.

Last year, the three banks went to the market watchdog after clashing with Apple over:

1. Apple’s contractual stipulation that any bank who adopts Apple Pay cannot pass on Apple’s fees to customers (a fight they abandoned on February 13); and

2. Apple’s refusal to let third-parties access its near-field communication chip, which in practical terms means banks can’t release their own virtual wallets to compete with Apple Pay, at least not for Apple’s devices.

The fourth major Australasian bank, ANZ, reached a deal with Apple last year. Terms haven’t been disclosed (though US reports say a card issuer must pay Apple 0.15% of a credit card transaction and 0.5c for each debit card transaction). So far ANZ is the only bank to support tap-and-go payments via Apple Pay across Australia and New Zealand.

Apple argued that its Apple Pay wallet was the best solution for competition because its virtual wallet can hold credit cards from different banks.

The ACCC echoed this argument with its final decision today, saying collective negotiation was likely to reduce competitive tension between banks.

The regulator also noted that banks are already active in mobile payments (though NBR would note Apple’s NFC restriction means all of the action has been on phones and other devices that run Google’s Android software).

In choosing not to intervene, the ACCC also noted that “mobile payments are "in their infancy and subject to rapid change."

In a joint statement today, Westpac, NAB and CBA said they were disappointed, and that the decision would stifle mobile wallet innovation.

Nevertheless, although they don't like it, they now only have one choice if they want to be part of the Apple Pay party, or gain access to its NFC: negotiate one-on-one with Apple.

And iPhone is where they do need to be. In September last year, Semble — a jont venture between Spark, Vodafone, 2degrees and Paymark (cooperatively owned by the major banks) — was put to sleep. Semble's virtual wallet failed for a number of reasons, including its need for a new SIM card, and its failure to fill its promise to lure loyalty programmes. But in large part, it was ignored because it would not work with Apple's handset.

Although being the loyal BNZ customer for more than 20 yrs I have just opened the ANZ account. Apple Pay is convenient and here to stay. Not to mention that I trust Apple more than various outsourcing outlets local banks like to engage with.

The banks will already know how many of their customers are using Android vs Apple by looking at the usage of their banking apps. It is unlikely that customers will spend more money just because they have apple pay. So the bank only benefits if EFTPOS payments instead go through apple pay. Or people switch their banking to them just for Apple pay.

Then there is the contract risk of the government regulating credit card fees. Yet the bank still having to honour a contract with Apple.